This is part of our Big Six series. We're digging into the six big areas of money and financial planning.
Last time we talked about your income.
This one is on your expenses. The K.G.B is watching! To find out what I mean, watch the video below:
The acronym I like to remember for expenses is K.G.B.
K stands for "know". You have to know how much you're spending each month. And what you're spending on.
I'm all for auto-payment and bank drafts for stuff. But only after you've scrutinized what's important and made priorities.
I love using a credit card for purchases because it's so easy to track and review. Just DON'T carry a balance on the card!
Plan on spending an hour each month reviewing your credit card, bank and ATM spending. And be honest.
The G stands for "guilt free spending". If you're using goals-based planning and have everything set up correctly, you should have money every month to spend how you want. No guilt, no regrets.
Goals-based planning means you know how much you need to put away for goals, and have it automatically invested for those things. Right off the top.
Once that's done, whatever is left you can spend. Guilt free. Nice.
The B stands for "big". If you can't find that guilt-free spending amount each month, don't look at the little things. Like that $4 coffee.
First, look at the big spending items. Like your house or car. And I don't mean see if you can refinance your mortgage from 4.25% to 4.125%. (Obviously do that if you can.)
I mean ask yourself if you should sell that $450,000 house and move into a $200,000 one.
Can I move closer to where I work and save $400 dollars a month in gas and maintenance? Not to mention time.
Do I need to pay $300 a month on this car? Or can I buy a used one for $8,500 that's more gas efficient.
Do I need to pay $200 every month for this TV service? Or cell phone plan?
I know it's hard to think about. But it's important.
Cutting out the $4 coffee is nothing compared to those big decisions. Especially if you love stopping by the coffee shop. :)
Getting control of your expenses is one of the easiest ways to grow wealth.
Just make sure you're focused on the right things.
PS - Leave a comment below. Have you ever heard of the K.G.B idea?